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Sep, 10 2010

STEP INTO FOOTWEAR

MARCHING into footwear retail is no less than a challenge. The Indian footwear retail market is expected to grow at a CAGR of over 20 per cent till 2011.

MARCHING into footwear retail is no less than a challenge. The Indian footwear retail market is expected to grow at a CAGR of over 20 per cent till 2011.  As in clothes, footwear also follows categorisation closely, as per the occasion and demand. This clearly shows the growth in the industry. In case you are worried if you'll fit the bill or no, here's how to put your best foot forward.

Business potential

India's annual domestic consumption of footwear is 1.1 billion pairs per annum. However, despite the presence of a large number of brands, both national and international, unorganised players sway the market share in their favour with over 50 per cent in their pocket. The numbers in the organised market stand at about US$ 2 billion, accounting for about 48.4 per cent of the market. As per Manmohan Agrawal, Director, Bigshoebazaar.com, "The Indian footwear industry is worth Rs 25,000 crore, and is growing at a rate of 15 per cent on a yearly basis." Twenty three per cent of this share of the organised footwear retail is franchised in India. In terms of foreign exchange, footwear is one of the biggest earners and garners about Rs 10,000 crore per annum. Action shoes, Liberty, M&B, Woodland, Bigshoebazaar, VI-GA, and Red Tape are some of the most common franchise names in the industry. The Indian market is also flooded with internationally renowned franchise brands like, Reebok, Carlton London, Adidas, Pavers England, Nike, Puma and many more.

Loopholes

Impediments are endemic to any business what-so-ever it may be. The footwear sector also has its share of glitches with supply chain management, service, quality, evolving styles and managing inventory being the rifest. International labels that are operating on Indian shores have a comparative edge over national brands in these aspects. Indian franchisors are also looking into these problems and coming up with solutions to these issues. While in the sports segment, it is advisable to partner with international franchise labels; in other segments Indian franchisors have lucrative business offers.

Price has been another concern for franchisors as well as customers. But lately, it seems to have taken a back seat, as the number of offerings has increased for customers with the coming up of more brands into the segment. Competition has lowered the pricing of merchandise. Competition from domestic players is helping franchise names to offer value for money to the customers. On the other hand, competition from international labels is helping Indian counterparts to offer western designs. This, in turn, is profitable for a franchisee, as the inventory cost for them while purchasing stocks also falls a little.

Franchisability

Footwear retail is an essential sector in franchising. With the experience and coming up of many international names, franchisors now effectively offer the franchise plans to aspiring entrepreneurs. They have in place well-drafted franchise proposals and guidelines to offer franchisees the needed know-how and intricacies for running the business successfully. This will make it easy for a new entrant to carry out the business lucratively as compared to the option of starting his own label. Training and support is extended in almost all areas from setting up the store to training the employees. Sportswear and casual wear footwear lead the list of the most franchised concepts and together account for about 23 per cent of the franchise share. With between 30-40 franchise concepts to pick from, franchise stalwarts are taking the industry ahead in terms of expansion and organisation. As a business option, you will be in safe hands.

Financial viability

When it comes to financial dynamics, margins in the footwear business are relatively lower. The success is defined by the volume of business that is carried out by the franchisees. Location and catchment area play key roles in defining the volume of business that can be carried out. In terms of location, North India is found to be the most favoured vicinity with 43 per cent share. Having your own location is more profitable in this business as rents are high. If a major chunk of the investment goes into rents, then the profit margin are be lowered, which unbalance the viability of this business. The returns range is anywhere around 15 per cent of the investment put into the business. For luxury footwear stores, the returns are higher but so is the investment. Also in case of luxury stores, the returns are prolonged. So according to the choice of the segment you wish to jump into, the returns will vary.

Exit option

The approximate franchise term in this industry is around four years. A franchisee can exit the franchise agreement before the term if he wishes but with prior notice to the franchisor. Conforming this, Agrawal says, "A franchisee has all the rights to exit a franchise agreement but he should have a prior approval from the franchisor.”

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